Ethiopia Continues to Attract Strong FDI Despite COVID-19

Foreign investors continue to show strong interest in Ethiopia despite the COVID-19 induced demand and supply shocks as well as uncertainty in global financial flows.

According to the Office of the Prime Minister, pharmaceutical products and agricultural related investments keep generating increased Foreign Direct Investment (FDI) in the country.

The Government of Ethiopia is maintaining its efforts to promote and facilitate new investments in these sectors, for instance, through the continuous development of the  Kilinto Pharmaceutical Industrial Park and Agro-industrial Parks, the office stated.

Noting that since 2012/13, FDI inflows to Ethiopia have been growing on average by 50 percent per year, reaching a peak of 4.1 billion in the 2017/18 fiscal year, Ethiopia has become the largest recipient of FDI in the East African Region and the fifth largest in Africa, it was indicated.

As Ethiopia in 2019 introduced a series of economic reforms aimed at improving the investment, the country was anticipated to attract increased FDI in 2020.

However, the possibility of this outcome has diminished due to the COVID-19 and resulting disruption in the international trade and investment flows. It is estimated that global FDI flows will decline by 30 percent to 40 percent during 2020-21.

In this regard, this global trained is likely to have a direct impact on FDI flows to Ethiopia and the country’s global attracting increased investment into export-oriented activities, the office stated.

For instance, among the export-oriented sectors, tourism is the most affected sector by COVID-19 shock in which over 80 percent of hotels in Addis Ababa have closed their operations since the start of the pandemic.

While the situation is expected to slow the growth of the sector and the new investments until 2021, another export-oriented industry that attracted a significant amount of foreign investment is floriculture.

As a result, the Government of Ethiopia is monitoring closely the lessons from the COVID-19 shock and identifying the policy measures necessary to support the post-coronavirus recovery in order to mitigate the short-term impact of the virus.

The government’s measure is also expected to have equal importance in economic achievements, speedy recovery and continues attracting increased FDI into key export sectors, the Office of the Prime Minister concluded.